Cryptocurrencies are one of the most hyped and yet poorly understood technological phenomena since the invention of the internet, but that doesn’t mean you can’t take advantage of all it has to offer.

In this Kraken review, we’re taking a look at the company, a cryptocurrency exchange that enables you to get started with cryptocurrency like Bitcoin. Learn more about the blockchain, how cryptocurrency works, why you need an exchange, and how to stay safe and avoid fraud.

Plus, check out our final thoughts on whether or not cryptocurrency investment is right for you, and whether Kraken is the exchange you should use.

If You Don’t Know This, Kraken Isn’t For You

The number rule of investing is: don’t invest in what you don’t understand. This doesn’t mean you shouldn’t say, purchase stock in Apple if you don’t completely understand the tech behind the latest iPhone--but you definitely should understand what an iPhone is and who’s buying it.

Unfortunately, this is a rule a lot of people--and even large investment firms--don’t fully employ, and partly to
blame for the Great Recession, which was kicked off by shady business practices most people didn’t fully understand.

Cryptocurrency like Bitcoin is the same; if you don’t have a basic understanding of how it works, there’s a good chance you’ll get fleeced--or worse. The good news, however, is that it doesn’t have to be as mind-boggling as you think it is now.

With a little elbow grease and our brief guide to blockchains and cryptocurrency, you’ll be on your way to understanding Bitcoin and other coins, placing yourself in a great position to make some
smart investments!

What is Currency, Anyways?

Different kinds of currency

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Currency--whether it’s the United States dollar or the Japanese yen--is all about trust and stored time and promises. We trust that the government who produced the currency will still be around in the future; we trust that we’ll be able to exchange our time for this “paper trust,” which in turn will bring us more food, medical care, clothing, housing, or whatever else we might need in the future.

This is the same concept cryptocurrency works on, but instead of being issued and heavily controlled by a government, it runs democratically. It’s able to do so thanks to the blockchain. What is the blockchain? We’re so glad you asked!

The Blockchain

The blockchain is an idea based on decentralization. The internet, as most of us used it today, is extremely centralized; there is central control, and different people plug in to use it.mA blockchain, however, is a completely decentralized network where everyone has all the information.

All transactions are logged by every member on the network, making it difficult for a fake or incorrect transaction to exist.

The blockchain isn’t just used for cryptocurrency; it’s a network concept that has mammoth implications for everything from supply chain management to the government.

At the heart of the blockchain is trust. Trust is vital for the success of any system or market--a government, a supply chain, or currency. People don’t give resources to other people unless they trust they will get something in exchange.

Organizations and systems have a lot of different ways of creating trust--the United States backs its dollars in gold, for example. Third parties like the Food and Drug Administration (FDA) verify that the ingredients in a cereal box are truthfully reported. And so forth. Ultimately, trust is built on the ability to verify data, such as transactions. And because everyone on the network gets the transaction verification for each data point, its trust factor is through the roof. It means you don’t need centralized authorities like the FDA, which can themselves be untrustworthy, to verify data--you can simply verify it for yourself because you have access to all the transactions across the entire network.

The First Cryptocurrency

Bitcoin, as you’ve probably heard, was the first cryptocurrency, a type of currency that works peer-to-peer and uses the blockchain. It is by far the most secure of all the cryptocurrencies, but other similar options are Litecoin, Ethereum, Ripple, and Monero.

Welcome to the Exchange

If you start reading up on exchanges, things start sounding real complicated real fast. At their core, however, they’re very simple: they help you exchange whatever you have--dollars, euros, bitcoins--for something else. In other words, they help you find buyers or sellers who want what you’re buying or selling.

Different exchanges work differently--some specialize in helping you trade anonymously, for example--and some work to be more “reputable” by partnering with financial institutions, but all take (or should take) security very seriously since that’s a major reason they exist--to help you make your exchanges securely.

You should also know that different exchanges list different types of fiat currency (such as the euro or the US dollar) and different types of cryptocurrency. If you want an obscure cryptocurrency and you’re using a not-so-common fiat currency, it might take you a while to find an exchange, but if you look hard enough, you’ll probably find something!

Kraken is well known for its extremely high number of exchange pairs, meaning you’ll be able to trade most major cryptocurrencies and fiat currencies through them. More on that later! 

Let’s Talk About Kraken--How it Works, Who Uses It, and Why

Man holding a bitcoin

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One of the first exchanges--and the first exchange to become huge--was Mt. Gox. Launched in 2010 in Tokyo, by 2014, 70% of all the bitcoin transactions worldwide were going through Mt. Gox. Within four years, however, things had gone south; in 2014 the company closed shop, in part because of more than 650,000 coins that had gone missing. In 2011, however, an American named Jesse Powell was invited to Mt. Gox to help with a major hack on the company.

It was there that Powell, a close friend of Roger Ver, one of the earliest adopters and evangelists of bitcoin, first realized how vital exchanges are to the cryptocurrency ecosystem.

Just a few years later, Mt. Gox would be shuttered, and Powell and his friend Ver would begin work on Kraken, which launched in September of 2013, a mere five months after Mt. Gox was closed.

Kraken was initially launched in Japan, just like its predecessor, and soon became known for offering to trade with the euro. In 2014, Kraken earned the distinction of doing the most trading volume between the euro and the bitcoin, something it maintains today.

Here’s What You Need to Know About Kraken

Kraken, today, is based in San Francisco. Its owner, Roger Ver, no longer resides in the United States as he renounced his citizenship in 2014. Jason Powell, however, remains as the CEO (he hasn’t done
anything with his citizenship).

In addition to the euro, the exchange also handles the following currency:

  • Canadian dollars
  • US dollars
  • British pounds
  • Japanese Yen 

Here are additional services Kraken provides:

  • Margin trading
  • A bitcoin pool of dark liquidity

Kraken was the first to:

  • Pass a proof-of-reserves audit, indicating that they have the reserves to handle basic runs
  • Partner with the first cryptocurrency bank
  • Become the court-appointed trustee for the Tokyo government
  • Have volume and trading price displayed on the Bloomberg Terminal

Kraken was also chosen to assist Japanese courts with the redress process for Mt. Gox customers, helping the company establish further credibility with investors. Kraken has a history of being considered extremely; if you’ve seen recent news reports, however, you might wonder if that’s still the case. Our next part of this Kraken review will take a look at that very question.

Is Kraken Still Safe?

Cryptocurrencies and US bank notes

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Kraken underwent rapid buyouts and growth from 2014-2015, prompting media and Twitter speculation that the company was no longer secure. In 2016, it went silent, leading panicking customers to threaten to report the company to the FBI.

By the time Kraken ended its silence, however, the company had ample proof that Kraken had never compromised; instead, Kraken systems, databases, and servers remained complete and intact.

Why Did Kraken Go Offline?

More recently, the company went offline for 48 hours to replace a trading system. This caused significant alarm among customers since Kraken had originally only announced a two-hour break in

Kraken kept up communication via social media, however, and the resulting updates ended up being very much needed, helping Kraken’s aging system compete with rising exchange stars like Coinbase and Binance.

These have been the only major safety concerns in the six or so years Kraken has been in business, and it continues to lead in security. Here are the additional security features you can expect from Kraken:

  • Cold storage techniques
  • PGP/GPG encryption
  • Available two-factor authentication, plus a master key and a global settings lock

What Else Do I Get When I Trade With Kraken?

Kraken allows you to register with one of five tiers: you can sign up with just an email address if you want to simply look around, or you can register with increasingly more secure registrations depending on the kind of volume and withdrawals you want to do.

Best practice, of course, is to not keep all your coins in one exchange, but if you’re starting small, it won’t matter at first. Kraken also has an iOS app, which is helpful.

What sets Kraken apart from its competition is its international availability. It’s available to you if you live in Europe, Canada, Japan, or the US, with 24/7 support. Plus, you’ll have access to an impressive 47 market pairs and seven fiat currencies.

Fees can be difficult to decipher because the fee schedule is extensive. This isn’t unusual--Kraken just happens to have a lot of market pairs and fiat currencies!

Kraken recently acquired Cryptowatch, which offers live price charts and market data for cryptocurrency. It’s now begun to integrate these offerings into its website and dashboard so that its customers have greater access to up-to-date info. Not everyone will need this extra info, but some will and will appreciate it.

The Bottom Line: How Does Kraken Compare to the Competition?

The bottom line on Kraken is that it’s an excellent platform--but best for seasoned traders who dabble in non-standard coins, value high liquidity because they’re trading at high volumes, and want access to fiat currency exchanges.

If you’re a beginner, you’ll likely be better off with an exchange like Coinbase, which has put significant effort into making itself a user-friendly exchange. You’ll find iOS and Android apps for Coinbase, and it serves as a wallet, not just an exchange.

Plus, Coinbase has licenses in most US areas (unlike Kraken, which has faced heavy scrutiny in places like New York), which means US investors can take advantage of the fact that the FDIC ensures coin holdings up to $250,000. 

Whichever exchange you decide to invest with, however, keep in mind that if you invest enough funds, you’ll need to work with multiple exchanges, in case of attack or fraud.

Should I Invest With Kraken?

Other than being difficult to use if you’re new, we don’t have much negative to say about Kraken. Our final opinion in this Kraken review is that the exchange is a proven, secure platform that provides most (if not all) of the services you’d want in an exchange.

​​Featured image source: Pexels